BDO lose BTC appeal

[ian1964 10,761]

https://www.supremecourt.uk/cases/uksc-2016-0073.html

 

 

RFC 2012 Plc (in liquidation) (formerly The Rangers Football Club Plc) (Appellant) v Advocate General for Scotland (Respondent) (Scotland)

 

Case ID: UKSC 2016/0073

 

Case summary

 

Issue(s)

 

Whether the Court of Session erred in law in reversing the specialist Tribunals below and concluding that payments of "emoluments" or "earnings", for the purposes of the Income and Corporation Taxes Act 1988 and the Income Tax (Earnings and Pensions) Act 2003, had been made by the appellant to its employees.

Whether, in order for a payment to constitute earnings for PAYE and NIC purposes, it is sufficient that the payment was "derived from" work done by a particular employee and/or it "it formed part of the employee’s employment package".

Whether the powers which each employee held as protector of a subtrust had the effect that the funds in that subtrust were unreservedly at the disposal of the employee and were earnings for PAYE and NIC purposes.

Facts

 

Murray Group Management Ltd established a Principal Trust for the benefit of its employees and the employees of any group company including the appellant which entered into a deed of adherence. The appellant established a number of subtrusts for the benefit of their employees families. The appellant would pay a contribution to the Principal Trustee with a direction that a sub-trust be established and funded for a family of a particular employee. The employee was appointed protector of the subtrust, and the subtrust trustee would lend the employee money that had been advanced to the subtrust from his employer.

 

The Commissioners for Her Majesty’s Revenue and Customs determined that these payments constituted earnings for PAYE and NIC purposes and sought to impose charges to tax.

 

The First-tier Tribunal allowed the taxpayers appeals and held that no payment of earnings had been made. The Upper Tribunal refused the Commissioners appeal. On appeal, the Court of Session held that payments of earnings for PAYE and NIC purposes had been made by the appellant. It found that the payments made to the Principal Trustee, and in due course to the subtrusts, amounted to a re-direction of income.

 

The Court of Session granted permission to appeal to the Supreme Court on the question of whether the payments were earnings.

 

Judgment appealed

 

[2015] CSIH 77

 

Parties

 

Appellant

 

RFC 2012 Plc (in liquidation) (formerly The Rangers Football Club Plc)

 

Respondent

 

Advocate General for Scotland

 

Appeal

 

Justices

 

Lord Neuberger, Lady Hale, Lord Reed, Lord Carnwath, Lord Hodge

 

Hearing start date

 

15 Mar 2017

 

Hearing finish date

 

16 Mar 2017

 

Judgment hand down date

 

05 Jul 2017

Edited June 28, 2017 by ian1964

[colinstein 294]

since the parties are informed in advance my guess is the club already know the outcome

[der Berliner 3,811]

Wonder whether any of the ITK guys can tell us about smiles or grim faces, but in essence, this is something for OldCo and BDO to ponder.

 

I can clearly envisage a bus-load of Scottish reporters driving down to London to watch this thing (if there is something to watch), with well prepared speeches one way oranother. The Yahoos will be sharpening their knifes and hope for the worst, so they can harass the SFA and SPFL for titles - "simply" by demanding a judgement from another "independent comission" ... given the new "evidence".

 

Just let me get this straight though, in the most simplest of terms. If the SC finds that EBTs were taxable, it only says that tax needs to be paid for them (with penalties and whatnot). It does not necessarily indicate that OldCo was a) doing something illegal at the time, nor that b) OldCo would have not paid tax if it had known that it had to. The EBTs were all included in the reports, after all. The issue of the side letters complicates things, as it indicates that these "loans" would never be recalled. In any case, if the tax bill is paid (one way or another), the case is settled.

[colinstein 294]

I can exclusively reveal that no one on here will have a clue until the day it's announced

[boabie 230]

I can exclusively reveal that no one on here will have a clue until the day it's announced

 

I agree. But that won't stop wasters like the tarred one, the begging liar fool JJ or complete dumplings like Muirhead continue to put out lies so the collection plate is aimed in the direction of the deluded masses. Another attempt to keep the leccy on for an hour or so of anti- Rangers diatribe.#

Nobody knows the result. The relevant solicitors will get a letter with orders not to open them until an hour before the result is announced.

[Walterbear 557]

Wonder whether any of the ITK guys can tell us about smiles or grim faces, but in essence, this is something for OldCo and BDO to ponder.

 

I can clearly envisage a bus-load of Scottish reporters driving down to London to watch this thing (if there is something to watch), with well prepared speeches one way oranother. The Yahoos will be sharpening their knifes and hope for the worst, so they can harass the SFA and SPFL for titles - "simply" by demanding a judgement from another "independent comission" ... given the new "evidence".

 

Just let me get this straight though, in the most simplest of terms. If the SC finds that EBTs were taxable, it only says that tax needs to be paid for them (with penalties and whatnot). It does not necessarily indicate that OldCo was a) doing something illegal at the time, nor that b) OldCo would have not paid tax if it had known that it had to. The EBTs were all included in the reports, after all. The issue of the side letters complicates things, as it indicates that these "loans" would never be recalled. In any case, if the tax bill is paid (one way or another), the case is settled.

 

At the summing up QC for oldco (Thornhill) accepted they were taxable but asked SC to rule that the trustees were accountable not Oldco. It would be hard to envisage SC overruling the appellants acceptance of the fact they were taxable. But who knows?

[Bluedell 5,679]

At the summing up QC for oldco (Thornhill) accepted they were taxable but asked SC to rule that the trustees were accountable not Oldco. It would be hard to envisage SC overruling the appellants acceptance of the fact they were taxable. But who knows?

 

Do you know on what basis he accepted that? If they are taxable because they are earnings then oldco would surely be liable.

[pete 2,499]

Do you know on what basis he accepted that? If they are taxable because they are earnings then oldco would surely be liable.

 

As far as I can remember they were not direct earnings. It was money put aside that players families could take up on the death of the player. They had the choice to do it or not which means that the recipient would be responsible for the tax.

[Walterbear 557]

Do you know on what basis he accepted that? If they are taxable because they are earnings then oldco would surely be liable.

 

Memory a bit fuzzy now BD and I'm not a tax or contract lawyer but I think it was that there was no contractual commitment to make the payment and the trust was managed outside the club by the trustees so if the EBT is taxable then it is up to the trustee to pay that tax. EBTs only became illegal retrospectively in 2012 although HMRC referred to a historical case (another footballer where a similar scheme was deemed as 'redirected earnings' ) which HMRC won. I think it was Peter Shilton. He was personally screwed but I don't know the details of how the trust was set up and what his employers role was other than to put money in it. The issue could well rest in the the side letters and whether they were deemed as a contract and therefore attract PAYE but the side letters didn't exist for everyone with an EBT and they apparently only said RFC would offset any tax liabilities which they may attract rather than admitting there was a tax obligation such as PAYE which RFC would pay at source I.e. It was a contract with clear remuneration for services. If it should have been paid at source and wasn't then the stripped titles clamour will be back. If they accept the trust was a benign act or a legitimate tax avoidance scheme under the law at that time then oldco may well win.

 

I suppose with some detailed knowledge of the law and a decision tree or flow chart this may not be too complicated to work out. Legal opinion and tax accountants however seem quite split and SC may well have the break new ground here.

 

Thornhill effectively pulled a rabbit out the hat in the last minutes of the hearing but whether it is enough to absolve oldco I've no idea.

 

From a practical perspective HMRC will get little from oldco so player liability would actually mean a return to the taxpayer.

 

From a stripping of titles angle this is important because if the judges don't accept Thornhill argument then oldco withheld PAYE therefore used money it didn't have to pay players. How this is no different from a club that goes into administration and only pays a few pence in the pound of its debt is something we will want to highlight if it goes badly. Hearts can hand back their 5-1 cup win over hibs for example.

 

Let's hope the rabbit wins the day coz this whole thing is nothing to do with sporting integrity as we know. Any other club and no one would care.

[Walterbear 557]

As far as I can remember they were not direct earnings. It was money put aside that players families could take up on the death of the player. They had the choice to do it or not which means that the recipient would be responsible for the tax.

 

More succinct than me pete! Thornhill did also accept that NI would be due from oldco but doubt this would be sufficient to result in title grabbing.